The document discusses Brazil's potential to become the world's breadbasket, highlighting its position as the third-largest agricultural exporter globally. It emphasizes the need for improved policies to enhance agricultural productivity amidst challenges such as high taxes and inadequate infrastructure. Additionally, the document touches on Brazil's evolving foreign policy, particularly regarding its relationship with China and the U.S., suggesting that balancing these relationships will be crucial for Brazil's future.

1. Economy, politics and policy issues • NOVEMBER 2011 • vol. 3 • nº 11
A publication of the Getulio Vargas FoundationFGV
BRAZILIAN
ECONOMY
ThE
Brazil: World’s
breadbasket
Brazil must meet 40% of increased demand
for food on the planet in the coming years
Foreign Policy
How Congress sees Brazil’s
foreign policy
Viewpoint
Should regional inequality
be a policy issue?
Roberto Rodrigues,
former Minister of Agriculture
How Brazilian agriculture
can lead the world
Seminar
The new National Solid
Waste Law

2. Economy, politics, and policy issues
A publication of the Brazilian Institute of
Economics. The views expressed in the articles
are those of the authors and do not necessarily
represent those of the IBRE. Reproduction of the
content is permitted with editors’ authorization.
Letters, manuscripts and subscriptions: Send to
thebrazilianeconomy.editors@gmail.com.
Chief Editor
Vagner Laerte Ardeo
Managing Editor
Claudio Roberto Gomes Conceição
Senior Editor
Anne Grant
Assistant to the Editor
Louise Ronci
Editors
Bertholdo de Castro
Claudio Accioli
Solange Monteiro
Art Editors
Ana Elisa Galvão
Cintia de Sá
Sonia Goulart
Contributing Editors
Kalinka Iaquinto – Economy
João Augusto de Castro Neves – Politics and Foreign Policy
Thais Thimoteo – Economy
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F O U N D A T I O N

3. 33
BRAZILIAN
ECONOMY
The
IN THIS ISSUE
22 14 28
News Briefs
4 Labor market, industrial
confidence slow … corporate
defaults rise … inflation and
capacity utilization drop … sports
minister resigns … roads in bad
shape … President offers to help
Europe.
Foreign Policy
8 How Congress sees Brazil’s
foreign policy
Brazilian legislators differ about
the importance of the U.S. and
China. Yet there is no polarization
between pro-U.S. and pro-China
interests in Congress. João Augusto
de Castro Neves discusses what the
differences imply for foreign policy.
Viewpoint
12 Should regional inequality
be a policy issue?
How important is regional
inequality? Is it as important as the
unequal distribution of income
among families, regardless of
where they live? Our commentator
suggests that policies that address
social inequalities throughout the
country will automatically address
regional income differences.
Cover Story
14 Brazil: World’s breadbasket
Brazil is the third largest agricultural
exporter in the world, second only
to the countries of the European
Union (EU) and the United States.
Claudio Accioli and Solange
Monteiro analyze whether Brazil’s
natural resources and technological
skills will be enough to keep it
competitive.
Interview
22 How Brazilian agriculture
can lead the world
Roberto Rodrigues, former Minister
of Agriculture, has raised nearly
R$13 million to launch “I am Agro”
to raise awareness of how much
the countryside contributes to the
Brazilian economy. He tells Solange
Monteiro how Brazil can assume
world leadership of a project for
food security and sustainable
energy but bemoans the lack of
a strategy, public or private, for
stimulating agribusiness.
Seminar
28 The new National Solid
Waste Law
After 20 years of discussion,
the National Solid Waste Law
was passed in December 2010.
Reporting from the first Seminar on
Solid Waste in Brazil: Perspectives
and Challenges, Solange Monteiro
reports on what experts, public
and private, had to say about the
prospects and problems associated
with the law.
November 2011 Ÿ The Brazilian Economy

4. 4 BRAZIL NEWS BRIEFS
November 2011 Ÿ The Brazilian Economy
ECONOMY
Labor market slackens
as the economy slows
According to the Minister of Labor, in
September Brazil recorded creation
of 209,078 jobs with a formal contract,
the lowest for the month since 2006,
when 176,735 formal jobs were
created, and 15% lower than the same
month last year. The main culprit was
manufacturing, which has lost 30,000
jobs this year. (October 18)
Industrial confidence still
sliding
The Industrial Confidence Index
fell 0.4% in October compared to
September, to 100.7 points; this was the
tenth consecutive drop. The October
number was the lowest since August
2009, according to the Getulio Vargas
Foundation. (October 31)
Corporate bankruptcies rise
in October
Corporate bankruptcies increased
by 21% in October over September.
Decelerating economic activity,
monetary tightening, the worsening
internationalsituation,andcompetition
from imports have adversely affected
corporate performance. (October 31)
Inflation and capacity utilization
both lower than expected
Inflation measured by the Getulio
VargasFoundationwas0.4%inOctober
compared to 0.75% in September.
Falling wholesale agricultural prices
are expected to keep a lid on
consumer inflation through the end
of the year. As speculation grows
that GDP will continue to decelerate,
capacity utilization for September
declined to 81.6%, down from 82.2%
in August, and industrial production
for September was down 1.6% year-
on-year. (November 8)
POLITICS
More access to public documents
approved
The Senate has approved the bill that
facilitates access to public documents
in all three branches of government at
all levels — city, state, and federal. The
House having already approved it, the
textwillnowgoforpresidentialsignature.
The law establishes a maximum of 50
years for restricting access to top-secret
documents. Although today such
documents are considered confidential
for up to 30 years, the period can be
renewed indefinitely. With the new bill,
confidential official documents can be
classified as reserved (5 years), secret
(15 years), and top secret (25 years).
(October 25)
Minister of Sports resigns over
corruption allegations
Minister of Sports Orlando Silva
(Communist Party of Brazil) left the
government yesterday accused of
embezzlement. He is the sixth minister
to fall since President Rousseff was
inaugurated. The president appointed
Congressman Aldo Rebelo of the same
party to succeed Silva. Rebelo said the
ministry will not continue partnerships
with NGOs, some of which have
been the target of accusations of
irregularities. (October 27)
New Minister of Sports Aldo Rebelo
Photo:JoseCruz/ABr.
INFRASTRUCTURE
The National Transport Confederation
(CNT) report shows that 57.4% of
Br a zilian ro ads have serious
deficiencies, and 26.9% are in critical
condition. CNT surveyed 92,747
kilometers of paved federal and state
roads; it says Brazil needs to invest
R$200 billion in road infrastructure; last
year’s investment was only R$9 billion.
CNT also said the government needs
to change its transport management
organization and curb corruption.
In contrast, less than 1% of privately
managed toll roads were found to
be bad, and none were very bad.
(October 26)
More than half of Brazilian roads are deficient
Private
Government

5. 5BRAZIL NEWS BRIEFS
November 2011 Ÿ The Brazilian Economy
ECONOMIC POLICY
OECD: Brazil needs to promote
integrity in public service
Brazil has made solid progress over
the past decade in the fight against
misconduct in the public sector, but
better procedures are still needed
to detect and prevent improper
acts by officials, according to a new
OECD report. The OECD review
looked at what Brazil has done in four
areas: promoting transparency and
citizen engagement, implementing
risk-based internal control systems;
embedding high standards of conduct
among public officials; and enhancing
integrity in public procurement. It
recommended that Brazil make risk
management a core responsibility of
all public managers, rather than a task
only for internal auditors. Managers
should be empowered to identify
and manage the risk of waste, fraud,
and corruption in their operations.
(October 27)
http://www.oecd.org/document/54/
0,3746,en_21571361_44315115_489439
90_1_1_1_1,00.html
Central bank benchmark rate cut
no surprise
Although an August 0.5% reduction
in the central bank benchmark rate to
12% was a surprise, financial markets
received the October 19 cut of 0.5%
to 11.5% with tranquility. The drop was
expected; the international landscape
has deteriorated considerably. It is likely
that further rate cuts are on the agenda
with inflation expected to converge
with its target next year. Weak growth
data (see below) gives the central
bank more room to cut interest rates.
(October 27)
Growth expectations again
deteriorate
The central bank’s weekly survey
of market forecasts reported that
GDP growth expectations for 2011
dropped by 9 bps to 3.20%, although
forecasts for 2012 held steady at
3.50%. The previous week’s industrial
production, capacity utilization, and
industrial confidence figures had
been surprisingly weak. See Focus
survey at http://www4.bcb.gov.br/
pec/GCI/PORT/readout/readout.asp
(November 7)
Public sector surplus in
September
Excluding interest payments on debt,
the public sector recorded a primary
surplus of R$8 billion in September. In
the first half of the year, the primary
surplus totaled R$78 billion (3.99% of
GDP), 66% of the target for the whole
year. (October 31)
President reports on G20 summit
President Dilma Rousseff said the
recent G20 summit in France was a
relative success in that the euro zone
countries have moved to decide
how to face the euro crisis, though
it offered no definite solution. The
eurozone issue dominated discussions
at the meeting. During the summit,
Rousseff reaffirmed that Brazil would
consider providing financial assistance
to Europe through the International
Monetary Fund on condition that more
details were provided about the rescue
package. Rousseff also confirmed that
Brazil would “not oppose” a tax on
international financial transactions,
which France was keen to support.
However, the U.S. and the U.K. forcefully
opposed the tax. (November 8)
President Rousseff during official photo at the summit of G20 leaders.
Photo:RobertoStuckertFilho/ABr.

6. April 2011
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7. 7
T
he Organization for Economic Cooperation
and Development has in effect challenged
Brazil to vastly expand its food production to
meet surging demand. Brazil is already the third largest
agricultural exporter in the world, after the U.S. and
the countries of the European Union. Throughout the
world rising incomes are stimulating demand for every
kind of food, from turkey to tofu. But not many places
are in as good a position as Brazil
to meet the demand.
We have just about everything
in place, at least physically, to meet
the OECD challenge: plenty of good
soil and pasturage, sunlight, and
water. We have brilliant researchers
who for years have used their deep
understanding of soil and climate
to triumph over every kind of
agricultural challenge.
Sowhat’stostopusfrombecoming
the world’s breadbasket?
Just the usual, the things that
threaten to cripple so many other
areas of the Brazilian economy:
expensive credit, high taxes,
unresponsive labor laws, and acute
difficulty in getting what we produce
to market because infrastructure is
so bad. In a nutshell, the problem is
the lack of political will to do what
needs to be done. Instead, there’s
political willingness to make grand
gestures that have no content — like
the insanely expensive bullet train
that will carry a few passengers
between the cities of Rio de Janeiro
and São Paulo cities. The same amount of money could
construct solid rail freight lines from Brazil’s Midwest to
the sea that could carry millions and millions of tons of
food from our producers to the hungry of the world.
Fields are old-fashioned. Agriculture is not flashy.
Orange juice is not “creative.” There’s no glamor to
demand for beef and soybeans — only much-needed
revenue. Agricultural products gave us our largest trade
surplus in 2010, US$50 billion. Think of how much
more they might bring in if Brazil actually encouraged
farmers and made it easier for them to produce more.
Instead ….
About 90% of Brazilian farmers have gross sales
of less than R$240,000 a year (US$140,000). Yet the
environmental regulations being discussed as part
of the Forest Code reform would
disproportionately punish small
farmers when what they really
need is to have their contributions
recognized and rewarded.
The government is ignoring the
problems caused by the vulnerability
of Brazilian cattle to foot and mouth
disease. It could be trading on the
brilliant work of our scientists in
genetics and nutrition to ramp up
production to the OECD goal.
Together the private sector and
the government could confront the
inefficiencies in the use of land, as
Uruguay has done, and open up
millions of hectares to more efficient
agricultural uses.
Competitiveness is the name
of the game in any economic
activity. Brazil has so many natural
advantages (including those
researchers) that so far we’ve been
able to compete with very little
effort to bring agriculture into the
21st century. Really we’ve been
coasting to success. But as other
countries make deliberate and
carefully defined efforts to make their agriculture more
competitive, if Brazil does not do the same, it will be
left behind. And many people around the world will
be left hungry.
It’s time to recognize the importance of agriculture
to the Brazilian economy and fertilize its growth with
good policies. Immediately.
So what’s to stop
us from becoming
the world’s
breadbasket? Just
the usual, the things
that threaten to
cripple the Brazilian
economy: expensive
credit, high taxes,
unresponsive labor
laws, and acute
difficulty in getting
what we produce
to market because
infrastructure is
so bad.
Time to plant more seeds
for success
FROM THE EDITORS
November 2011 Ÿ The Brazilian Economy

8. 88 FOREIGN POLICY
November 2011 Ÿ The Brazilian Economy
T
here is little doubt
that the rise of China
has triggered one of
the most dramatic changes
to Brazil’s foreign policy
agenda in the past decade. A
fellow member of coalitions
that represent the interests
of emerging countries, China
has also become Brazil’s
main economic partner. As a
result,fromarelativelydistant
positiononBrazil’sdiplomatic
radar in the 1990s, China is
now close to the center of
Brazil’s diplomatic strategy
for the 21st century.
As new priorities emerge
to join older concerns,
they begin to crowd the
foreign policy landscape.
A s w it h econom ic s ,
however, the unlimited
wants or objectives of
diplomacy are constrained
by a scarcity of resources.
Sooner or later, choices
have to be made. For many,
it is expected that China’s
new and increasing role
will entail a reshuffle of
Brazil’s relations with
more traditional partners,
such as the United States.
How to balance the
relationship with each
country will be a major
challenge for Brazil in the
next decade.
It is always difficult to
ascertain and then rank
a country’s foreign policy
preferences. T hough
ambiguity does have its
uses when it comes to
strategy and international
ba rgain ing, beneath
the intentional haziness
of diplomatic rhetoric,
preferences do coalesce into
different, sometimes even
conflicting, objectives.
How to channel these
differing preferences into
a comprehensive strategy
that benefits the country
is a constant challenge for
How Congress sees Brazil’s
foreign policy: Between the
U.S. and China
Brazilian legislators differ in their perceptions on the importance of both the U.S.
and China to Brazil. While China is predominantly seen as driving Brazil’s economic
expansion, the United States is considered a more reliable partner for political
objectives. Yet there is no polarization between pro-U.S. and pro-China interests
in Congress. What does this imply for foreign policy?
João Augusto de Castro Neves, Washington D.C.
joao@brazilpolitics.com.br

9. 99FOREIGN POLICY
November 2011 Ÿ The Brazilian Economy
decision-makers. This is
the general context that
informs discussions in
Brazil about the country’s
relations with China and
with the United States.
I f t he i ntent ion a l
ambiguity of the Brazilian
Foreign Ministry clouds
the ranking of Brazil’s
international preferences,
public debate usually
exposes more definite
i n t e r e s t s t h a t m a y
conceal less mobilized
— and possibly less
extreme — opinions. For
example, while leftwing
elements in the current
administration’s governing
coalition have exhibited
anti-American rhetoric
and an excessive optimism
about the “strategic
partnership” with China, a
considerable number in the
industrial sector embrace a
more protectionist, anti-
China, stance. Political
compromise between
these two camps is nearly
impossible.
So how should Brazil’s
foreign policy strategists
navigate the polarization
of interests? China and
the United States are
not only Brazil’s main
economic partners, they
are likely to continue to
be the dominant global
superpowers in coming
decades. The results of
an October 2011 survey
by Instituto FSB Pesquisa
of Brazilian legislators’
international preferences
may offer some clues.
Nearly40%ofthemembers
of Brazil’s lower house of
Congress answered three
foreign policy questions:
Is China a threat or•
an opportunity to the
Brazilian economy?
Which country should•
be Brazil’s main trading
partner, China or the
United States?
Which country should be•
Brazil’s main diplomatic
(political) partner, China
or the United States?
The answers to the
first question confirm a
generally positive view
of China’s impact on
the Brazilian economy:
57% see China as an
opportunity, 27% see it
as a threat, 13% see it
as both. The numbers
do not vary much across
party lines; it appears that
the government and the
opposition share similar
views on engagement with
China.
While leftwing
elements in
the current
administration’s
governing coalition
have exhibited anti-
American rhetoric
and an excessive
optimism about
the “strategic
partnership” with
China, a considerable
number in the
industrial sector
embrace a more
protectionist, anti-
China, stance.

10. 1010 FOREIGN POLICY
November 2011 Ÿ The Brazilian Economy
1010
The survey [on
Brazilian legislators’
international
preferences] seems
to refute the idea of
a clear polarization
between
pro-U.S. and pro-
China interests in
Congress.
This suggests that
it may be possible
to build bridges
between different
interests.
As to which country
should be Brazil’s main
trading partner, the
l e g i s l a t o r s f a v o r e d
China (43%) over the
United States (27%) or
both (25%). Here, the
differences between the
government coalition and
opposition parties were
much more dramatic.
The Labor Party (PT)
overwhelmingly endorses
trade with China (68%) or
with both countries (24%);
no PT member favored the
United States. The majority
of members of the two
main opposition parties,
the PSDB and DEM, prefer
trade with the United States
(54%), although 43% still
consider China (26%) or
both (17%) important.
Curiously, though, the
majority of responding
legislators think that
Brazil’s main diplomatic
partner should be the
United States (52%)
rather than China (27%)
or both (20%). Although
the pro-U.S. stance is
much clearer among the
opposition (74%), most of
the governing coalition,
with the exception of the
PT, also prefer the United
States to China.
What these figures
suggest is that Brazilian
legislators have quite
different perceptions about
the importance of both
countries to Brazil. While
China is predominantly
seen as a driver of Brazil’s
economic expansion, the
United States is considered
a more reliable partner for
other political objectives.
M o r e i m p o r t a n t l y,
however, the survey seems
to refute the idea of a
clear polarization between
pro-U.S. and pro-China
interests in Congress. This
suggests that it may be
possible to build bridges
between different interests,
which arguably offers the
Rousseff administration
an opportunity to craft
a more sophisticated
diplomatic strategy to deal
with both countries.

11. IBRE ECONOMIC OUTLOOK
The Brazilian economy and macroeconomic scenarios
The Brazilian Institute of Economics (IBRE)
Economic Outlook provides statistics,
projections and analysis of the Brazilian
economy:
Economic activity•
IBRE business and consumer surveys•
Employment and income•
Inflation and monetary policy•
Fiscal policy•
External sector and trade•
International outlook•
IBRE focus•
To know more, go to:
www.fgv.br/ibre
or call
(55-21) 3799-6799 and (55-11) 3799-3500

12. 1212 VIEWPOINT
November 2011 Ÿ The Brazilian Economy
Should regional inequality be a policy issue?
Whenever the inequality issue comes
up, the regional issue tags along. The
perceptionisthatanationalapproachtoincome
distribution is not enough; there must also
be programs that attack differences in wealth
betweenBrazil’sregions.Thetraditionalcontrast
between the south and southeast, on the one
hand, and the north and northeast, on the
other, is seen almost as a cartographic symbol
of extreme unfairness in Brazilian society.
However, regional inequality is not really a
major national problem. It is certainly much
less important than the unequal distribution
of income among families across the country
regardless of where they live.
Further muddying the debate is that in
discussions about regional inequality, two
different issues are often confused. The first
occurs when a geographically small area
produces a large share of national GDP. Here
income inequality is associated with inequality
in the geographical distribution of production.
The spatial concentration of production,
however, clearly does not represent a problem
for the government to address. Considering the
variations in the characteristics of productive
activities, production will never be equally
distributed throughout the country. A region
with a comparative advantage in agricultural
production will always tend to have a lower
share in GDP than a highly industrialized area.
This is the case, for example, in the American
Midwest. A famously rich region in terms of
income per capita, the granary of the world
has a relatively modest share of U.S. GDP. The
same can be said with certainty about the
overachieving vastness of Brazil’s Midwest.
What’s not the problem
The second type of regional inequality is
characterized by substantial differences in per
capita income between different regions of the
country. This, however, is not in fact a regional
problem.
Per capita income is lower in some areas
because the people, not the geographic space
The high degree of mobility
of labor in Brazil ensures
the integration of the labor
market and exercises a
strong effect in reducing
income inequality between
regions.
Photo: Marcello Casal Jr./ABr

13. 1313VIEWPOINT
November 2011 Ÿ The Brazilian Economy
itself, are less productive. Low productivity
is an attribute of the inhabitants, not the
geographical area. In other words, this kind of
regional inequality is, in essence, simply one
facet of social inequality.
Keep in mind that the Brazilian labor market
is well integrated. Workers with the same skills
arepaidroughlythesamewageanywhereinthe
country. The high degree of mobility of labor in
Brazilensurestheintegrationofthelabormarket
andexercisesastrongeffectinreducingincome
inequality between regions.
Thepercapitaincomedifferencesthatpersist
after leveling off the impact of an integrated
labor market are associated with patterns of
regional population settlement that are not
easily addressed by public policy. In regions
where per capita income is low, the population
has characteristics associated with low labor
productivity. These regions have a low cost
of living, which attracts people with lower
incomes.
Thus policies that address social inequalities
throughout the country will automatically
address regional income differences. The best
policy to address regional income disparities
is a good policy of income redistribution at
the national level. And indeed, poor regions,
because they are inhabited mostly by people
with low productivity or low income, benefit
the most from social programs such as rural
pensions and family grants.
Programsthatarespecificallyregionalalways
run the risk of taxing the poor. These initiatives
are funded by taxes paid disproportionately by
the poor who live in rich regions, and benefits
are snapped up by the economic elites living in
poorregions—alwaysarisk,giventhelobbying
poweroftheoligarchsinless-developedregions
of Brazil.
Summing up, the high mobility of labor
in Brazil suggests that social inequality
between individuals is much more important
than income inequality between regions.
Brazilian governments have done a good job
of improving national income distribution in
the last decade. It is best that the government
continue to focus on that task and not listen
to regional interests.
Giventhatthemainsourceoflowproductivity
and per capita income differences is insufficient
schooling, then, clearly the best policy will be to
usenationalpoliciestoreduceregionaldifferences
in the quality of educational systems.
Given that the main
source of low productivity
and income per capita
differences is insufficient
schooling, clearly the best
policy will be to reduce
regional differences in
the quality of educational
systems.

14. 1414 COVER STORY
November 2011 Ÿ The Brazilian Economy
The United Nations has named a baby girl, Danica May Camacho, born
October 31st in Manila, as the seven billionth inhabitant of the planet.
Thenewshighlightspopulationgrowthanditschallenges,particularly
food production. The Organization for Economic Cooperation and
Development (OECD) predicts that world food supply will have
to increase 20% over the next 10 years to stay even with demand,
especially in emerging countries and Asia. And the OECD says Brazil’s
food production will have to contribute 40% of the total.
Claudio Accioli and Solange Monteiro
Rio de Janeiro
14 COVER STORY
November 2011 Ÿ The Brazilian Economy

15. 1515COVER STORY
November 2011 Ÿ The Brazilian Economy
A
quiet revolution over the last two
decades has made Brazil the third
largest agricultural exporter in the
world, second only to the countries of the
European Union (EU) and the United States.
This impressive position is due not only to
such natural resources as plentiful soil, water,
and sunlight but even more to technological
advances.
Yet despite high productivity and enviable
potential for expansion, Brazilian agriculture
has some negatives, from livestock exposure
to foot and mouth disease to structural
obstacles to production, such as expensive
credit, high taxes, unresponsive labor laws,
poor infrastructure, and environmental
controversies.
Brazil is the top exporter of major
commoditieslikesugar,orangejuice,tobacco,
chicken, and beef and second in shipments of
soybeans. Its largest trade surplus, in fact, is in
agricultural products: US$50 billion in 2010.
Real Plan Pluses and Minuses
Marcos Fava Neves, professor of planning
and strategy, University of São Paulo State,
and coordinator, Markestrat, associates the
advance of agribusiness to the Brazilian Real
Plan, which introduced a new currency (the
real), curbed hyperinflation and stabilized
the economy in 1994. Former minister
Roberto Rodrigues points out that at the
time the government opened Brazil up
to international competition without any
protection. “This caused a wave that wiped
out thousands of producers,” he says, but it
also “brought about a great improvement in
competitiveness, supported by technology
and management.”
“All this, together with global demand for
grain and food, led to an explosive growth
of agribusiness in the last 15 years,” says
Neves. He predicts that Brazil’s agricultural
exports will rise from the current US$76
billion to about US$200 billion in 2020. “The
correspondence between consumption in
Asia and production in Brazil makes this
inevitable. It might be faster, if we adopt the
correctpublicandprivatestrategies,orslower.
ButitwillhappenbecauseBrazilistheleading
global food producer.”
Elibio Rech, the Embrapa researcher
who coordinated development of the first
transgenic soybean in Brazil, sees no threats
toBrazil’scomparativeadvantageinsoybeans.
“Genetic engineering has already developed
varieties that increase photosynthesis and
assimilation of nutrients by plant roots. But
the problem is cost,” he says. “Without water,
you cannot plant. Africa and China have little
water.”
This does not mean, however, that the
technology race in Brazil will slow down.
Rather, more and more institutions are
seeking capital to expand research. Take the
A quiet revolution over the last
two decades has made Brazil the
third largest agricultural exporter
in the world, second only to the
countries of the European Union
and the United States.

16. 1616 COVER STORY
November 2011 Ÿ The Brazilian Economy
Brazilian exports of selected agricultural products, 2010
PRODUCE World's exports (tons) Brazil's exports (tons) Main exporters Brazil's ranking
Soybeans 98,258,000 29,073,000 U.S., Brazil, Argentina 2˚
Sugar 51,824,000 28,000,000 Brazil, Thailand, Australia 1˚
Cellulose 44,314,000 8,229,000 Brazil, Canada, U.S. 1˚
Orange juice 1,472,000 1,199,000 Brazil, U.S., Mexico 1˚
Tobacco 2,652,000 677 Brazil, India, China 1˚
Beef 7,253,000 1,731,000 Brazil, Australia, U.S. 1˚
Chicken meat 8,666,000 3,800,000 Brazil, U.S., European Union 1˚
Sources: USDA, FAO, Abiove, Brazil Ministry of Agriculture, Bracelpa, CitrusBR, ITGA, Abiac, and Ubrafe.
Campinas Agronomic Institute (IAC), linked
to the Agency of Agribusiness Technology of
the Department of Agriculture and Supply of
SãoPaulostate.Withanuninterruptedhistory
of 124 years, IAC research has been vital at
critical moments when Brazilian agriculture
has had to cope with, for example, citrus
diseases in the 1940s, sugar cane mosaic in
the 1950s, and coffee leaf rust in the early
1970s. “Thanks to our understanding of soil
and climate, for example, the IAC was able to
develop coffee varieties adapted to warmer
regions,” explains agronomist Hamilton
Humberto Ramos, IAC director general since
March. “Climate change is a major focus of
attention today, as we move forward to
solutions for the problems of the future.”
Ramos sees one of his responsibilities to
be seeking new resources from private
enterprises. In 2010, of the R$25 million
needed to support the budget, only
halfcamefromtheprivatesector,withtherest
from federal agencies and funds from other
states. “My intention next year is to increase
fundraising by 5% to 10%,” he says. For him,
intensified partnerships with companies will
bring another benefit: to promote the use
of seed varieties developed at the institute.
“Today, it is the researcher‘s job to advertise in
Brazil,” Ramos says. “Thus, a partnership with
the private sector would facilitate the spread
of these varieties. In addition to improving
the image of the institute, it improves farmer
incomes. It would be good for everybody.”
Similarly, in January 2011 the Center for
Sugarcane Technology (CTC), in Piracicaba,
São Paulo state, changed its status from a
non-profit to a corporation, with Coopersucar
and Cosan as the main shareholders. “We
spent the first few months … adapting the
documentation,”saysOsmarFigueiredoFilho,
CTC director of markets and opportunities.
16 COVER STORY
November 2011 Ÿ The Brazilian Economy

17. 1717COVER STORY
November 2011 Ÿ The Brazilian Economy
is productivity. Sampaio points out that the
United States, despite 50% fewer cattle than
Brazil, has about 20% higher production.
Among other factors, he says, the U.S. cattle
are raised in confinement. “Still,” he adds,
“we have the greatest potential to grow
because our technology in genetics and
nutrition is among the best in the world. …
We can gain in productivity by making better
use of both ​​pasturage and herd size.”
The choice of Brazilian livestock farmers
to avoid confinement has been questioned,
for environmental reasons and to free cattle
ranges for more productive crops. According
to Sampaio, the mathematical models of the
Institute for International Trade Negotiations
(Icon) estimate that over the next 30 years,
supplying domestic and export demand for
soybeans, cotton, sugarcane, eucalyptus, and
some crops will require freeing up about 15
million more hectares. “More than 10 million
acres of old pasture areas can be freed by
efficiency gains in livestock. The other lands
will come from arable land in the Cerrado, not
the Amazon, where legislation and the cost
of opening new areas make it unprofitable,”
Sampaio says, noting that the country has a
goodtrackrecordofsustainability.“Evenafter
200yearsofraisinglivestockwehaveretained
“This year, our budget was R$80 million, and
we want to enhance it.”
Neves believes that technology could still
advance many areas of Brazilian agriculture;
hecitesinitiativessuchasgeneticallymodified
(GM) foods, better use of land, and asset and
equipment sharing. “The importance of safe
GM, sanctioned by the National Technical
Commission on Biosafety (CTNBio), has
already been demonstrated. The new GM
beans that Embrapa has just developed, free
of typical diseases, mean a huge gain for
societyworldwide,”FavaNEvessays.“Imagine
reducing the cost and pollution of pesticides
in African countries, for example.”
The Environment Question
The magnitude of the numbers for some
sectors may mask shortcomings and
difficulties. Take livestock. Using figures
from the U.S. Department of Agriculture and
Brazil’s Ministry of Industry, Development
and Trade, the Brazilian Association of Meat
Export Industries (Abiec) shows that Brazil
is now the second largest producer of beef,
with its estimated volume of 9.7 million
metric tons in 2011 behind only the 12 million
metric tons of the U.S. This year its beef
exports should reach 1.650 million metric
tons. But the sector is not without problems.
The first is vulnerability to FMD (foot and
mouth disease), which restricts beef trade
with markets like the U.S., Japan, and South
Korea. “It will take a determined effort by the
Brazilian government to solve the problem,”
says Fernando Sampaio, Aboec director
and coordinator of sustainability. Another
Technology could still advance
many areas of Brazilian
agriculture, such as genetically
modified foods, better use of land,
and asset and equipment sharing.

18. 1818 COVER STORY
November 2011 Ÿ The Brazilian Economy
Share in global food
exports, %
COUNTRY 1980 2010
U.S. 51 31
Brazil 1 16
Argentina 7 9
Australia 6 6
Trade balance of agricultural
goods, 2009
COUNTRY BALANCE (US$ billion)
1˚ Brazil
49.5
2˚ Argentina
26.2
3˚ U.S.
18.8
4˚ Thailand
18.6
5˚ Canada
15.2
6˚ Indonesia
13.9
7˚ Australia
13,7
8˚ Russia
-8.0
9˚
-30.5
10˚ China
-35.7
Sources: Agroconsult, WTO.
Sources: MBconsult and USDA.
European Union
85% of the Amazon, 87% of the Pantanal
(tropical wetland), 63% of the Caatinga
(Brazilian Northeast savanna), 60% of the
Cerrado (Brazilian Midwest savanna), 41% of
the Pampas (South American lowlands), and
26% of the coastal Atlantic forest. Europe has
preserved only 0.3% of its original forests.
Renewable water per capita is also higher
here than in other meat-producing regions
of the world.”
In 2009 a Strategic Affairs Secretariat of
the Presidency study identified 200 million
hectares that were abandoned or used for
low- productivity livestock farming. “We’re
still a country with just 1.3 head of cattle per
hectare. We need to bring in technology and
skilled labor,” says Elibio Rech of Embrapa.
Glauber Silveira, president of the Association
of Producers of Soybeans and Corn of the
Mato Grosso state (Aprosoja), says that the
same hectare could produce 10 tons of grain,
although he realizes for some degraded areas
the high cost of recovery may not pay off. “In
Brazil, we could release at least 25 million of
hectares of pastures and increase agricultural
production by 80% without opening any
new areas,” says Silveira, pointing out that
in Uruguay repurposing pasture for soy has
claimed about 1.1 million hectares. “But it has
to be profitable,” he says.
Although Brazilian soybean cultivation is a
world productivity — 50 bags per hectare in
the 2010/11 crop — farmers in the Midwest
must spend heavily on technology and
other investments to compensate for poor
soil. “Our production cost is higher than in
other countries,” Silveira says. “The United
18 COVER STORY
November 2011 Ÿ The Brazilian Economy
Brazil is now the second largest
producer of beef; its estimated
volume of 9.7 million metric tons
in 2011 is behind only the 12
million metric tons of the U.S.

19. 1919COVER STORY
November 2011 Ÿ The Brazilian Economy
Soybeans: Changes in productivity and acreage,
2004-2009 (% change)
COUNTRY Planted area (millions of ha) Production (metric tons/ha)
Argentina 3.7 -4.8
Brazil 4.0 39.0
China 5.8 11.8
France -0.7 0.5
Japan -4.7 -2.3
Russia 2.4 19.5
European Union 15.6 -10.7
U.S. -0.1 8.9
Source: Aprosoja, 2011.
States uses 30 kg of fertilizer per hectare and
Argentina 40; we use 450 kg. And we have
to import it because high taxes discourage
production of fertilizer in the country,” he
explains. To make matters worse, financing
is scarce.
The High Cost of Inefficiency
Soybeans have been the main commodity
exportedsincethe1980s,whentheydisplaced
coffee. According to Aprosoja, in the past 10
years area planted in soybeans rose ​​48%,
but production grew 200%. “We made ​​great
strides, especially in biotechnology. But to
extend that advantage it is necessary to open
roads,improvelogistics,takecareofportsand
railroads,” Silveira says.
Ignez Lopes, coordinator of the Center for
Agricultural Studies of the Brazilian Institute
of Economics of Getulio Vargas Foundation
(IBRE), explains that “because agriculture is
unable to pass on higher costs to prices, any
inefficiencyburdensproduction,especiallyfor
small farmers,” she says. She explains that the
tax burden — estimated at 37% for the sector
— and appreciation of the Brazilian real both
cut profit margins.
19COVER STORY
November 2011 Ÿ The Brazilian Economy
The Institute for International
Trade Negotiations estimates that
over the next 30 years, supplying
domestic and export demand
for soybeans, cotton, sugarcane,
eucalyptus, and some crops
will require freeing up about 15
million more hectares.

20. 2020 COVER STORY
November 2011 Ÿ The Brazilian Economy
FranciscoTurra,CEOoftheBrazilianPoultry
Union (Ubabef), agrees with Lopes that taxes
and real appreciation depress agricultural
competitiveness. In 2010 Brazil ranked third
(12.2 million metric tons) in world chicken
production, after China (12.5 million) and the
United States (16.6 million).
Since 2004 Brazil has been the world
leader in poultry exports, followed by the
U.S. and the EU. In 2010, it shipped 3.8
million tons to more than 150 countries, an
increase of 5% over 2009. And “the demand
for animal protein is increasing worldwide,”
Turra says. “In Africa, for example, rising
incomes have stimulated consumption of
food, especially chicken. Rabobank, which
specializes in agribusiness, predicts that by
2030 poultry consumption will expand by
60% and it will become the most common
animal protein at the table, surpassing pork
around the world.”
FEA-YSP’s Neves warns, however, that
Brazil’scomparativeadvantagesaredecreasing
because the country is not addressing critical
bottlenecks or working to boost production:
“Today, investment decisions are made by
multinational companies, which are finding
more favorable and friendlier conditions in
other countries than in Brazil. For now, we are
still in a comfortable situation, with capital
inflows reaching record highs. In the medium
and long term, however, we are vulnerable
because we have not made any progress in
the reforms we need to make the country
more competitive.”
Urgently needed, Neves believes, are
tax reduction and simplification, and labor
reform, because structural factors make it
hard to hire workers. But his greatest concern
is infrastructure. “It’s a disaster,” he says. “Why
build a bullet train [between São Paulo and
Rio de Janeiro cities] when we could use the
money to establish a route from the Brazilian
Midwest to the Pacific coast and Asia, which
is the major export market for food and
bioenergy in the world?”
Supporting Small Farmers
According to the last IBGE Agricultural Census
in 2006, 4.4 million family farms account for
84% of Brazilian agriculture. An IBRE study
foundthat3.3millionsmallfarmersgetfederal
support and credit through the National
ProgramforStrengtheningFamilyAgriculture
(Pronaf). These properties account for 18% of
the total area of ​​Brazilian agriculture.
Even though the numbers are modest
compared to large producers, small farmers
contribute considerably to the basic food
basket of Brazilians. Lopes points out how
they are integrated with large agribusinesses:
“Livestock producers, for example, benefit
from the competitive price of corn to feed
their animals, and often work in an integrated
system with large companies with supply
Although Brazilian soybean
cultivation is a world leader
in productivity, farmers in the
Midwest must spend heavily on
technology and other investments
to compensate for poor soil.

21. 2121COVER STORY
November 2011 Ÿ The Brazilian Economy
contracts that guarantee a certain price
stability against market price volatility.”
Embrapa’s Rech emphasizes the need to
intensify efforts to bring more technology
and better management to small farmers.
“What we have to show the world is that
we can innovate in the least efficient and
most needy sectors,” he says. “If we want to
increase production, we have to think about
public policies to strengthen small farmers.
This will imply reducing carbon emissions,
application of pesticides and fuel, taking the
whole country to sustainable agriculture.”
In its 2009 document, the Presidency SAE
agrees, arguing that an effective agricultural
policy should not only consolidate Brazil “as a
majoragriculturalexporter”butalso“enhance
complementarities between corporate and
family farming.”
Considering that about 90% of Brazilian
farmsrecordgrosssalesoflessthanR$240,000
a year (US$140,000), Ignez warns that small
farmerswouldbedisproportionatelypunished
Brazil’s comparative advantages
are decreasing because the
country is not addressing critical
bottlenecks or working to boost
production.
by the environmental regulations being
discussed as part of the Forest Code reform:
“Treatingcorporatefarmingandsmallfarmers
under the same conditions may undermine
the sustainability of small farms and become
a disincentive to new investment.”
Neves argues that this is the time to
eliminate ideological biases: “There is much
talk about income distribution, but very
little about creating income. The National
Indian Foundation (Funai) wants 20% of
Brazil’s territory to be indigenous area, and
conservationists want 80% of Brazil’s territory
to not be exploited. … It is worth asking them
how we would then generate income and
export products. Brazil is well positioned to
produce and export food and bioenergy in
an entirely sustainable manner, for it is today
one of the most competitive countries in the
world in this segment.”
The tax burden — estimated
at 37% for the sector — and
appreciation of the Brazilian
real both cut agricultural profit
margins.

22. 2222 INTERVIEW
November 2011 Ÿ The Brazilian Economy
The Brazilian Economy — In recent
years, much has been said about the
global importance of Brazil’s agricul-
ture. What have been the high points for
Brazilian agribusiness?
Roberto Rodriguez — The great devel-
opment was the opening of the Brazilian
Midwest savannah area in early 1970
with the Nippon-Cooperation Program
for the Development of the Brazilian
Cerrado, with cooperatives and settle-
ments funded by the Brazilian and
Japanese governments. This coincided
with the creation of the Brazilian Agri-
cultural Research Corporation (Embrapa)
in 1973. My farmer was a farmer, and I
bought a farm in the cerrado (Brazilian
savannah). A competent agronomist told
me I would regret the purchase: no one
wanted bad land.
The introduction of technology to
the cerrado is marked by a very impor-
tant triad: Brachiaria, zebu cattle, and
soybeans. Brachiaria is a rough grass
that has adapted to the savannah, which
How Brazilian agriculture
can lead the world
Roberto Rodrigues
Former Minister of Agriculture
Solange Monteiro, Rio de Janeiro
After decades advocating for the potential
of Brazilian agribusiness, former agriculture
minister Roberto Rodrigues, now a businessman
and academic, coordinator of the Center for
Agribusiness School of Economics, FGV São
Paulo, has raised nearly R$13 million to launch
“I am Agro,” to raise awareness of how much the
countryside contributes to the Brazilian economy.
Rodrigues discusses major achievements that
haveputBrazilianagribusinessontheworldradar.
He explains why sale of Brazilian land to foreign
private entities should continue, and comments
on how Brazil can assume world leadership of a
project for food security and sustainable energy,
and on the lack of a strategy, either public or
private, for agribusiness.
Photo: Roosewelt Pinheiro/ABr.

23. 2323INTERVIEW
November 2011 Ÿ The Brazilian Economy
allowed for exponential growth for the
cattle. Since by fixing nitrogen in the
soil soybeans improve its quality, the
cerrado became the goal of the modern
pioneer: farmers who had 15 hectares
[ha] in Rio Grande do Sul, the Parana,
the Santa Catarina sold their land and
came to the Midwest to buy 10,000,
20,000 ha, transforming the region and
giving a continental dimension to our
agriculture.
The Agronomic Institutes of Campinas
and Paraná and some universities spurred
the process, but it was mostly Embrapa.
Its creators — Ministers Luis Fernando
Cirne de Lima and Alysson Paulinelli —
prioritized a massive build-up of human
resources. From the beginning, techni-
cians were sent abroad for advanced
education, and Embrapa’s high-level
technical staff has given a big boost to
Brazilian agricultural technology.
In July this year you helped launch the
“I am Agro” movement, something you
tried many years ago. Why is it accept-
able now?
Public policies are only carried out if the
majority of society is in favor of them. If
society continues thinking that agricul-
ture is old-fashioned, cannot compete,
defaults on its debts, as Fernando
Henrique Cardoso would say, and more-
over spoils the environment, public policy
will never be consistent.
For 30 years I’ve been trying to change
this scenario. Why is it happening now?
The world has begun to see Brazil as an
emerging agricultural powerhouse. Late
last year, the Organization for Economic
Cooperation and Development [OECD]
reported that in the next 10 years the
world’s food supply has to grow 20%. The
OECD predicted that Brazil’s agriculture
will grow 40%.
At the same time, foreign capital,
which saw Brazil’s potential before the
government and OECD, is flowing into
sugarcane, buying and merging Brazilian
groups. And without any reduction of
protectionism in developed countries,
with no domestic subsidy, the country’s
exports have been growing, thanks to
technology and training and dynamic
Brazilian farmers.
What has facilitated the training of
Brazilian producers?
Until 1994, Brazilian agriculture was
protected by the government, in a very
paternalistic way, with bad public policy,
with inflation of 80% a month, with
a closed economy. Then the situation
changed dramatically: inflation was
curbed and Brazil was opened to inter-
national competition. In the process,
thousands of producers disappeared,
especially small producers in the South
and Northeast and big producers in the
Midwest who could not pay their debts.
But there was also a huge improvement in
The world has begun to see
Brazil as an emerging agricultural
powerhouse.

24. 2424 INTERVIEW
November 2011 Ÿ The Brazilian Economy
competitiveness, backed
by technology already
a v a i l a b l e t h r o u g h
Embrapa. But there
was no management
oriented to agriculture,
no computer software
promoting its modern-
ization. It took almost
10 years for technology and modern
management to reach the sector.
Globally, what are the issues that most
influence agribusiness?
There is a lack of world leadership.
Obama was the hope to give a new direc-
tion to the world, but the U.S. economy’s
crisis wrecked that hope. Europe has no
important leader. China, India, Russia
are powerful but have internal problems.
International institutions like the United
Nations are ineffective. … The driver of
the contemporary world is financial, but
the financial system has no ideology, no
country, and no religion. Business weighs
only two things: growth and concentra-
tion. This leads to terrible consequences
and economic crises.
We have to find something that excites
the planet: poor, rich, Asian, African,
American, European ... The world is
facing expensive food, increasing hunger,
and energy shortages. The world needs a
joint effort to address food security and
sustainable energy.
Is Brazilian agribusiness in a position to
lead this project?
Over the past 20 years,
the area planted with
grains grew 30% in
Brazil, and grain produc-
tion increased 179%.
T he se nu mb ers a re
stunning. Currently, we
cultivate 49 million ha
of grain. If productivity
was the same as it was 20 years ago, we
would need 53 million more ha. In other
words, using very modern technology,
unique in the world we have preserved 53
million ha. That’s sustainability.
And this technology is attracting
international capital. Why do you think
Bunge, Cargill, ADM, Petros, Total,
Petrobras buy ethanol plants in Brazil?
Renewable energy. And we have it ready
— or at least partly ready, because our
logistics are bad, our trade policy is a
tragedy, and we do not have phytosani-
tary protection. We have no strategy.
“I am Agro” proposes that Brazil take the
lead in a project of global food security
and sustainable energy, because we’ve
already done part of the homework. It
will help people realize that, thanks to
agriculture, they will have cheaper jeans
and toilet paper, a better life, and Brazil
will grow wealthier, with more jobs and
more exports.
What stands in the way of this?
Logistics and infrastructure are the most
serious challenges; any increase in grain
production confronts infrastructure
bottlenecks. Another problem is income
Our logistics are bad,
our trade policy is a
tragedy, and we do not
have phytosanitary
protection. We have no
agricultural strategy.

25. 2525INTERVIEW
November 2011 Ÿ The Brazilian Economy
policy. The whole world, except Brazil,
has rural insurance and price support
policies. Right now … agricultural prices
are rising because the supply is less than
demand, consumption is growing because
of the emerging countries, and prices are
going up. Fertilizer, machines, pesticides,
seeds, credit, transport ... are all paid for
by high prices. But what happens when
supply equals demand, inventories return
to normal, and prices begin to fall? … An
income policy for the sector is essential to
end this inefficient business cycle.
Do trade agreements also affect this
scenario?
Yes. We need more trade. In the last 10
years we have placed all our hope in the
Doha Round. Mexico has made agree-
ments with Chile, Colombia ... Everyone
has made bilateral agreements with China,
South Africa, creating markets. We’re
lagging behind. We need a more aggressive
trade policy that involves government and
private agreements as well, to add value
and participate more in global markets. It’s
unbelievable that cattle
here still get foot and
mouth disease (FMD).
Mexico ended FMD in
1948. We lose millions
of dollars in beef exports
because the Ministry
of Agriculture has no
money for phyosanitary
protection.
Finally, improving
technology is vital. We
have by far the best technology in the
tropical world, but this scenario is
dynamic, it is constantly evolving. So you
always have to invest in technology, espe-
cially private companies. The government
cannot do everything.
What about regulatory factors, such as
the Forestry Code and restrictions on
sale of land to foreigners?
I support a definitive law like the Forest
Code that can balance sustainability issues
and farmers’ interests, but the bill passed
in the House needs corrections. That
will not be hard, and I hope we can do it
quickly, eliminating retrograde ideological
extremism on both sides. As for land
sales, we should not sell land to foreign
governments, particularly China, but as
for the private sector, what’s the problem?
… Private companies go to Argentina,
Colombia, and don’t come here. It is esti-
mated that Brazil lost U$15 billion last year
because of [such restrictions]. It’s foolish;
we have land, technology, and people, but
we lack capital.
Today, Brazil concen-
trates its agriculture
in exportable prod-
ucts like soy, corn,
and sugar that have
benefited from rising
international prices.
Are there medium-
term risks? Are we
making the bet in the
right direction?
“I am Agro” will help
people realize that,
thanks to agriculture,
they will have cheaper
jeans and toilet paper,
a better life, and Brazil
will grow wealthier,
with more jobs and more
exports.

26. 2626 INTERVIEW
November 2011 Ÿ The Brazilian Economy
There are many very serious risks.
Imagine if China has a crisis, its inflation
explodes, it decides to change its import
program. This is a risk not only for Brazil
but for the whole world. To open markets
and trade policy is vital.
Another issue is adding value to
exports. Brazil now exports about a
third of the green coffee in the world
but less than 3% of roasted and ground
coffee. Germany and Italy, which do not
plant coffee, export more than half the
coffee products in the world. So should
we roast and grind coffee to sell? No. If
Brazil exported roast and ground coffee
to Europe or Japan without a trade agree-
ment, our products would die at the ports.
Any decision to industrialize the agricul-
tural sector to add value depends on trade
agreements. Otherwise, we cannot add
value to our exports.
Today it is charged that Brazil’s agricul-
tural production for biofuels jeopardizes
food security worldwide.
Energy is the crucial issue today. Glob-
ally, increased food demand over the next
10, 20, 30 years is small compared with
demand for energy. Japan, the European
Union, and the United States together have
an average of 61 cars for every 100 inhab-
itants. China and India, representing one
third of the world’s population, have less
than 3 per 100. In recent years, China has
been buying the most cars in the world.
Because of the cars it will consume more
fuel than food. Clearly, oil will not be the
salvation. Therefore, bioenergy is vital. Of
course we should not substitute energy for
food. But we have the model with sugar
cane and cellulose.
Any country can produce food. Even
Siberia. It may be expensive, but it can
be done. Bioenergy can only be produced
efficiently if there is sun year-round. And
where is it sunny year-round? It is between
the Tropics of Cancer and Capricorn
— where Latin America, Sub-Saharan
Africa, and Asia’s poorest countries are
located. These are the countries that can
produce bioenergy, not only for fuel but
also for electricity for cogeneration. In
these poorest countries, the population
will grow more, so will per capita income,
and so will demand for energy, renewable
energy, and less CO2 emissions. This
changes global geopolitics. I think that
bioenergy is even more important for
Brazil than food.
Yet we face problems with the supply
of ethanol.
This happened because we do not have
a strategy, public or private. In 2009, it
rained a lot and we couldn’t harvest 60
million tons of sugarcane. In 2010, there
was a brutal drought that lowered produc-
Without any reduction of
protectionism in developed
countries, with no domestic
subsidy, the country’s exports have
been growing, thanks to technology
and trained and dynamic
Brazilian farmers.

27. 2727INTERVIEW
November 2011 Ÿ The Brazilian Economy
tion by 50 million tons.
This year it is estimated
that the harvest will
be 15% lower. In three
years, that’s nearly 200
million metric tons less.
Meanwhile, domestic
demand has grown enor-
mously because of the
flex car. Another factor
is the explosion in sugar
prices from shifting production from
alcohol to sugar. None of these factors
would be much of a problem if there were
a clear strategy that incorporated storage,
logistics, production, and financing.
How do you think the Ministry of Agri-
culture is doing?
I hope they do a good job. But the Foreign
Relations Ministry makes international
agreements. The Ministry of Develop-
ment, Industry and Foreign Trade, with
the Foreign Trade Chamber (Camex),
makes the trade rules. The Ministry of
Environment deals with forests. The
Ministry of Agrarian Development
handles land issues. Logistical questions
are the province of the Ministry of Trans-
port, for railways and highways, and the
Port Authority. Government banks such
as the National Bank for Economic and
Social Development and
Banco do Brazil deal with
financing. The Ministry
of Planning manages
resources and plans.
The Central Bank sets
interest and exchange
rates. Unless there is a
government agricultural
strategy that brings all
this together, you could
appoint Jesus Christ as a minister, but
nothing would happen.
What are the prospects for agribusiness
in the next decade?
In Brazil, there are restrictions on foreign
investment. But there is also an internal
movement of large Brazilian business
and industrial groups that see agribusi-
ness from a new perspective. Economic
issues will spur the process, but the poli-
tics could be either highly restrictive or
highly propulsive — it will depend on the
vision of the Brazilian government. The
president is a determined woman, and I
think she wants to make Brazil a major
player in global agribusiness.
The future has arrived. I am very
hopeful that our time has come, that an
external drive will lead Brazil to produce
an effective strategy.
Imagine if China has
a crisis, its inflation
explodes, it decides
to change its import
program. This is a risk
not only for Brazil but
for the whole world.
We need a more aggressive trade policy
that involves government and private
agreements to add value and participate
more in global markets.

28. November 2011 Ÿ The Brazilian Economy
The new National
Solid Waste Law
Solange Monteiro, São Paulo
A
fteralmost20yearsofdiscussion,the
National Solid Waste Policy (PNRS)
was passed in December 2010. In
general, it has been much praised. However,
the law divides responsibility for correct
waste disposal between manufacturers,
retailers,distributors,importers,consumers,
and government. The question now is how
to bring together different players with
different degrees of awareness, training,
and financing. This was central to the
discussion during the first Seminar on
Solid Waste in Brazil: Perspectives and
Challenges, presented October 24–25 in
São Paulo, by the Conjuntura Econômica
magazine and the Brazilian Institute of
Economics (IBRE) of the Getulio Vargas
Foundation.
CONCEPT
Asking why previous proposals had failed
and the PNRS succeeded, Congressman
Arnaldo Jardim ((see p. 40 sidebar for full
titles of all participants), who chaired the
Photo: José Cruz / ABr.
28
Solid waste
SEMINAR28
Brasilia – Work station of the Cooperative of Recycling, Labour and Production (Cortrap).

29. 2929
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
29
working group responsible
for the policy proposal,
said, “This is an integrating
law.” Significantly, the PRNS
replaced the concept of
polluter-payer ( “which
sounded like a threat”)
with the idea of ​​shared
responsibility. A second
factor was to set targets by
sector for collection and
disposal with reporting
s y s t e m s a n d w a s t e
inventories. “It is expected
that industries will come to
a consensus on their tasks,”
Jardim said. “Only when
there is no consensus will
the government impose
mandatory targets.”
Nabil Bonduki of the
Ministry of Environment said
the first PNRS requirement is
to minimize residues. “The
packaging industries, for
example, should rethink the
packaging of products with a
short shelf life that generate
waste quickly,” he said.
Sharing management of solid
waste will require first-rate
planning “because the PNRS
will not be successful unless
all levels of government are
mobilized to carry out its
Arnaldo Jardim
Nabil Bonduki
Werner Grau Neto
“It is expected that
industries will come
to a consensus on
their tasks. Only when
there is no consensus
will the government
impose mandatory
targets.”
Arnoldo Jardim
“The PNRS will not be successful
unless all levels of government
are mobilized to carry out its
policies.”
Nabil Bonduki
“Our society is not used to
thinking that the government,
citizens, and industry all have a
share in this task.”
Werner Grau Neto

30. 30
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
30
policies.” Bonduki said the
PNRS policy objectives can
transform Brazilian society —
fighting poverty, for instance,
by bringing collectors into
the formal market
For Jardim, the challenge
is for society to change its
consumption patterns. He
pointed out three major
tasks for successful PNRS
implementation: “First, we
must reconcile existing state
and municipal laws; there
are still conflicts. Second, it is
necessary to institute policy
tolls, particularly taxes. And
third, we have to valorize
recycled material.”
Lawyer Werner Grau Neto
said,“Oursocietyisnotusedto
thinking that the government,
citizens,andindustryallhavea
share in this task.” He stressed
the responsibility to carefully
craft agreements so that they
donotgeneratedisputes.“We
cannot wait for the judiciary
to decide questions about
this policy, nor wait another
20 years to see it in place,”
he said.
MUNICIPALITIES
The experts saw municipal­
ities as weak links in the PNRS
chain. The 5,565 Brazilian
municipalities must present
waste management plans by
August 2012 and close dump
sites and start landfills and
selectivecollectionbyAugust
2014. So far, according to the
Ministry of Environment,
just 1,112 municipalities
have landfills, and 670
have selective collection.
According to businessman
Cristina Godoy
Breno Palma
Eleusis Bruder Di Creddo
THE GREAT CHALLENGE
Increasing the number of sanitary landfills and expanding selective collection of garbage
Counties with sanitary landfills Counties with selective collection
Region
Number
of counties
Population
(Millions)
Number
of counties
Population
(Millions)
North 37 2 16 1
Northeast 97 15 57 11
Midwest 62 4 27 2
Southeast 534 51 335 38
South 382 15 235 7
Total 1,112 88 670 58
Source: Ministry of Environment.

31. 3131
Solid waste
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November 2011 Ÿ The Brazilian Economy
31
Breno Palma, even in urban
centers claiming to have
selective collection, the
recycling rate is less than
2% of total waste produced.
He estimated that every year
the country loses R$8 billion
in recycling opportunities.
According to Eleusis
Bruder Di Creddo, Brazil’s
urban population currently
generates 183,000 metric
tons of waste a day, 32%
of which could be recycled
but only about 0.3% (1,500
metric tons) actually is. It
is true, he said, that every
day recyclers handle 26,000
tons of metal, 10,000 tons of
paper, 26,000 tons of plastic,
and 1,300 tons of glass. But,
he said, this “comes from
industry, which already has
a reverse logistics chain and
informal collection.”
Many analysts consider it
unlikely that municipalities
will articulate good waste
management plans in an election year,
but Bonduki said that failure to meet the
deadline will mean a loss of transfers from
the federal government and stressed
the need to find economically viable
ways to establish systems. One study, he
said, suggests regionalization, bringing
all municipalities into 380 larger units.
The cost of setting up and
maintaining landfills only
becomes feasible, he said, for
regions with at least 120,000
residents. Large regional
units, he added, “could be
managed by concession,
public-private partnership,
or direct provision.”
Cristina Godoy noted that
in the 1990s, the Company
of Environmental Sanitation
Technology of São Paulo
state (Cetesb) helped to
establish municipal consortia
to set up landfills, “but bad
management eventually
resulted in dumpsites,” she
said. That must be avoided
this time.
For mayor Mario Reali,
well-managed consortia
m i g h t h e l p g e n e r a t e
technical expertise. “We have
Mario Reali
Wladimir Ribeiro
Diógenes Del Bel
Consortia “require mayors with
regional vision. In addition, the
consortium not only demands
scale, it demands that large
municipalities help small ones.”
Wladimir Ribeiro

32. 32
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
32
Sussumu Honda
RETAIL AT THE EPICENTER
Every day about 25 million
Braziliansgotoasupermarket.
That is why the retail sector
has become the center of
major initiatives to raise the
awareness of consumers and
suppliers.
Although the three
largest supermarket chains
operating in the country
added nearly 800 points
for voluntar y disposal
(PEVs) including packaging,
batteries, light bulbs and
electronics, Sussumu Honda
said supermarkets are
still concerned about the
PNRS concept of shared
management. “When it
comes to reverse logistics,
many questions remain to be
investigated and decided,”
he said.
Honda pointed out that
“The private sector has to
carry out a number of actions
thatdependontheefficiency
ofthepublicsectorinselective
collection. Otherwise, it may
beamajoreffortfornothing.”
He also had questions about
the management capacity of
cooperatives of those who
work with solid waste. “When
the policy is implemented,
solid waste volumes will
increase significantly, and
logistics will have to work
in parallel,” he said. “If not,
we risk seeing supermarket
parking lots transformed into
dumpsites.”
Honda argued that in
addition to sharing res­
ponsi­bilities for disposing
of used products, retailers
and manufacturers should
consider sharing costs and
think about pricing. “There
is the risk of burdening the
consumer in a few product
categories, inhibiting their
consumption,” he said.
Actions within the retail
sector have unquestionable
potential. Honda pointed
out the sector’s previous
commitments to the Ministry
of Environment to reduce the
use of plastic bags by 40% by
2014;insomecitiesthetarget
has already been met. In fact,
he said, in Jundiai city the
use of plastic bags is down
by 95%.
Felipe Zacari Antunes said
that Walmart encourages use
of reusable bags by offering
customers a three-cent
refund for every five items
purchased without a plastic
bag; “since 2009, we have
paid R$1.9 million in refunds
tocustomersandreducedthe
use of plastic bags by 42%.”
Environmentally friendly reusable bags are sold commercially to replace
plastic bags.
Photo: Fabio Rodrigues Pozzebom / ABr.

33. 3333
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
33
to invest in technology and
institutional arrangements,”
he said, citing the example of
Lindoia region in São Paulo,
where 14 municipalities have
come together to set up a
shared landfill.
Lawyer Wladimir Ribeiro
warned, however, that
consortia do not solve all
problems. “They require
mayors with regional vision.
In addition, the consortium
not only demands scale,
it demands that large
municipalities help small ones.
If São Jose dos Campos city,
for example, does not help
cities like Monteiro Lobato
and Paraibuna,” he said, “the
solid waste problem will not
be solved.”
A problem identified by
Diogenes Del Bel is that
there is no information
system to serve as a basis
for decision making. The
ideal would be a national
database consolidating all
waste treatment company
inventories in each state,
to help establish a quality
standard for waste treatment
services.
OdairLuizSegantinipointed
out that if there is to be a
shift in the model for waste
management, the taxpayer
will have to pay for it. “Today,
the average investment in
public sanitation in Brazil is
R$10 per person per month.
In some U.S. states it is R$70,
and the excellent public
sanitation in Japan costs
R$100,” he said. Municipalities
will need to establish ways to
collect such taxes.
Odair Luiz Segantini
Newton de Lima Azevedo
Estanislau Maria
“Today, the average investment
in public sanitation in Brazil is
R$10 per person per month. In
some U.S. states it is R$70, and
the excellent public sanitation in
Japan costs R$100.”
Odair Luiz Segantini
“Even if the cities had all the
resources they need to invest
[in waste disposal] today, it
would not help because cities are
not prepared to manage waste
systems.”
Newton de Lima Azevedo

34. 34
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
34
November 2011 Ÿ The Brazilian Economy
34
Creative Economy
SEMINAR34
André Luis Saraiva
THE COMPLEX ELECTRICAL AND ELECTRONIC LANDSCAPE
The PNRS requires certain
sectors to undertake reverse
logistics. This will not be
easy for the electrical and
electronics sector, which
represents 15% of Brazil’s
industrial output, 4.5% of
GDP, and a vast variety of
products.
André Luis Saraiva ques-
tioned whether an industry
so diverse — household
appliances, computers, and
cell phones among other
products — can carry out
reverselogistics.Amajorobs-
tacle, he said, is the attitude
of the Brazilian consumer.
“With used electronics, 35%
of consumers keep them;
29% donate them; and 19%
sell them. So how can we
comply with the law?” he
asked. “The industry should
be responsible for recycling
100% of returned products,
not sold products; otherwi-
se, to meet the target some
industries will rent, not sell,
theirproducts,takingowner-
ship away from consumers.”
Saraiva also mentioned
the relatively large infor-
mal market in information
technology. “A trade fede-
ration surveyed in Rio de
Janeiro reports that 42% of
consumers buy pirated pro-
ducts. Who will recycle those
goods?” he asked. “Who
is responsible for reverse
logistics in e-commerce,
which already represents
32% of purchases in the
country? What about li-
censing and approval of
hazardous waste transpor-
tation? Who is responsible
for deleting information
from computers and cell
phones that are returned?”
Saraiva argued for gradual
implementationofthelawto
give adequate time to raise
consumer awareness of how
recycled inputs are used in
new products.
Saraiva also pointed out
that there are no companies
in Brazil that recycle, for
example,usedprintedcircuit
boards and monitors. “Most
companies end up reselling
collected materials abroad,”
he said.
Photo: ABr archive.

35. 3535
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
35
Felipe Zacari Antunes
Cesar Faccio
Adrianna Charoux
Newton Lima Azevedo
believes no institutional
arrangement will be effective
if it does not prioritize the
improvement of public
services. “Even if the cities
had all the resources they
need to invest [in waste
disposal] today, it would
not help because cities are
not prepared to manage
waste systems,” he said.
“We have 100 million people
who do not benefit from
sewage treatment. To bring
them into the system, we
would need to invest about
R$17 billion a year through
2020. In the case of treated
water, we are losing 40%
in distribution. This is a
serious waste.” According to
Azevedo, the 26 sanitation
utilities in Brazil have more
expenses than revenue, which
suggestspoorgovernance.He
recommends instead public-
private partnerships.
CONSUMERS
Some seminar participants
argued adamantly that a
major aspect of the PNRS
should be to educate society
about the need to change
consumption patterns. “We
already consume one and a
half times what the planet
can produce and absorb.
We are using our ecological
overdraft,” said Stanislaus
Maria. He noted that 76%
of the resources extracted
globally are consumed by
only 16% of the people and
gradual improvement in per
capita income in developing
countries could considerably
IF IT IS PROFITABLE, THERE IS MARKET
Share of selective garbage collection in total recycling, 2008
Solid waste
Quantity
(1,000 tons/year)
Sharein
total recycling
(%)
Metals 9,818 1
Paper 3,828 8
Plastic 962 18
Glass 489 10
Source: Ministry of Environment.

36. 36
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
36
exacerbatetheenvironmental
problem.Henotedcitieswhere
awareness is more advanced.
For instance, Copenhagen,
Denmark, is building a huge
composting plant within the
city. “Copenhagen intends
to have zero waste by 2016,”
he said.
To reach this level will
entail a huge educational
effort, considering that “70%
of the population dispose of
batteries in the trash, 66%
drop medicines in the trash,
and 39% discard cooking
oil down the water drain,”
pointed out Felipe Zacari
Antunes. Brazilian consumers
have not yet felt in their
pockets the consequences
of their mismanagement
of solid waste. In the tire
industry, for instance, “unlike
Europe, where the cost of
disposing of used tires is
reflected in a fee paid by the
consumer upon purchase
of a new tire, here the
costs … must be paid by
manufacturers,” said Cesar
Faccio, whose organization
is responsible for recycling
the tires manufactured in
Brazil.
Adrianna Charoux noted
that the PNRS is not clear
about the responsibilities of
consumers. It is necessary, she
said, to establish clearly how
to dispose of products and
packaging and develop an
efficient collection system.
In 2006 Estre, a company
that p rov id es lan d f ill
management, logistics and
waste disposal, and soil
remediation, established
the Estre Institute, which in
partnership with University
of São Paulo state offers
environmental education
programs for schools. It aims to reach
11,000 high school students in 2011.
Fernanda Belizário argued that
educating from childhood on transcends
environmental concerns; she believes
we need to show how in modern society
consumption is part of the process of
forming each individual.
Fernanda Belizário
Jorge Augusto Rodrigues
Jorge Soto
“We do not talk about garbage;
that is pejorative. We look at
everything as if it is input, and
find a place for it.”
Jorge Augusto Belizário

37. 3737
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
37
Roberto Laureano Rocha
SOCIAL INCLUSION
Can all dumpsites be
closed by 2014, as the
National Solid Waste Policy
requires? Everything will
depend on whether the
thousands of collectors who
work in dumpsites can be
brought into the formal
market. “Today we have
about 600,000 collecting
workersworkinginunhealthy
conditions, and they need
to participate in the solid
waste treatment cycle,” Nabil
Bonduki said.
R o b e r t o L a u r e a n o
Rocha says the National
Movement of Recyclable
Material Collectors (MNCR)
supported the law but still
sees many challenges. “The
first is to ensure we integrate
[collectors in] this process
in a dignified manner,”
he said. Rocha argued
that collectors need to be
seen as service providers
and should participate in
discussions on technologies
for processing each type of
solid waste.
ForWernerGrauNeto,the
law raises other questions.
“There is the issue of
handling hazardous waste,
which the government has
been unable to address with
adequate health policies [for
affected workers],” he said.
“But that implies a liability
risk for private companies,
and now the courts are
inundated with lawsuits
by cooperatives against
companies.”
Henio De Nicola noted
that “Strengthening the
integration of collectors is
desirable. But it is not clear
… where funding will come
from to invest in collector
cooperatives to meet the
policy goals,” he said. “Today
only 7% of all collecting
workers are organized in
cooperatives.” The industry
will have to pay to bring
collectorsintothesolidwaste
treatment cycle.
The appropriate destination of garbage is a problem that affects most
Brazilian cities.
Photo: ABr archive.

38. 38
Solid waste
SEMINAR
November 2011 Ÿ The Brazilian Economy
38
Renato Netto
Renault Freitas de Castro
Henio De Nicola
BUSINESS
Because companies are
exposed to public judgment
on their environmental
practices, the private sector
has already taken action.
Jorge Augusto Belizário,
for instance, said that “We
do not talk about garbage;
that is pejorative. We look
at everything as if it is input,
and find a place for it.” In
the Souza Cruz company, he
says, this line of thinking is
applied not only to reducing
the waste generated, but also
to inputs. “For example, our
water consumption in 1999
was 8.7 cubic meters of water
per thousand cigarettes
manufactured; today, it is 2.2
cubic meters,’” he says.
At the Braskem petro­
chemical company the
commit­ment to sustainability
goes beyond reducing
waste. “We encourage the
market for recycled plastic
by purchasing it,” Jorge Soto said; he
believes that other large buyers should
do the same. Similarly, Renato Neto said
that Johnson Johnson is “concerned to
use recycled material, reducing amounts
— the packaging for Band Aids now uses
20% less material — and thinking about
the life cycle.”
Companies see good
business opportunities in
recycled waste. “The market
for recycling aluminum, for
example, is composed of 2,000
companies with revenues
exceeding US$600 million,”
says Renault Freitas Castro.
Henio De Nicola stressed
theimportanceofgovernment
incentives to encourage
recycling, and gave credit to
Brazil.“Inthelastnineyearswe
haverecycledmore[aluminum
cans] than countries like Japan
and Germany. It is a self-
sustaining chain that does
not depend on subsidies. We
do not get tax relief,” he said.
“That means an aluminum
can, whose life cycle is one
month, pays the same taxes
12 times in a year.”
Flavio Miranda Ribeiro
thought that companies
in general are showing
more interest in their
responsibilities. In October,
the government received proposals from
sectors that the PNRS requires to use
reverse logistics related to collecting,
disposing or recycling their used products.
“We received over 100 proposals. It is an
important test to determine the maturity of
productive sectors to negotiate aggressive
commitments,” he said.

39. 3939
Solid waste
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November 2011 Ÿ The Brazilian Economy
39
Flavio de Miranda Ribeiro
Silvano Costa
S i l v a n o C o s t a w a s
also optimistic about the
p r osp e c t s f o r r eve r s e
logistics. “The logistics can
be carried out through
government regulation,
statements of commitment,
or sectoral agreements. We
want to prioritize sectoral
agreements,” he said.
Ribeirosaidthatcompanies
realize that their inputs will
become increasingly scarce
and expensive, so saving
resources has value. He saw
four major ingredients in
the PNRS transformation of
Brazil’s consumer society:
“First, it is recognized that
many changes are underway,
and other radical ones must
happen soon; second, society
must mobilize for action and
take responsibility; third,
there is an unquestionable
need for convergence of
efforts and policies; and
finally, we recognize that
environmental education is
indispensable.”
The
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ECONOMY
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40. 40
Creative Economy
SEMINAR40
SEMINAR PARTICIPANTS
felipe zacari antunes, manager of sustain-
ability, Walmart
Newton de Lima Azevedo, vice president,
Brazilian Association of Infrastructure and
Basic Industries (Abdib)
Diogenes Del Bel, chairman, Brazilian As-
sociation of Waste Treatment Companies
(Abetre)
Fernanda Belizário, coordinator, Institute for
Environmental Education
Jorge Augusto Belizário, manager of envi-
ronment, health and safety, Souza Cruz
corporation
Nabil Bonduki, Secretary of Urban Water
Resources and Environment, Ministry of
Environment
Renault Freitas Castro, executive director,
Brazilian Association of Manufacturers of
Recyclable Cans (Abralatas)
Adrianna Charoux, specialist in sustainable
consumption, Brazilian Institute for Con-
sumer Defense (Idec)
SilvanoCosta,director,DepartmentofUrban
Environment, Ministry of the Environment
Eleusis Bruder Di Creddo, director, Associa-
tion of Solid Waste and Public Sanitization
(ABLP)
Cesar Faccio, general manager, Reciclanip,
which recycles tires manufactured in
Brazil
Cristina Godoy, coordinator of the environ-
ment,SpecialActionGroupforEnvironmen-
tal Protection, Public Ministry of São Paulo
SussumuHonda,CEO,BrazilianAssociationof
Supermarkets (Abras)
Arnaldo Jardim, congressman; chairman
of the congressional working group that
drew up the National Solid Waste Policy
Stanislaus Maria, senior communications
coordinator, Institute Akatu
Renato Neto, director of environment,
safety, health and sustainability, Johnson
Johnson
Werner Grau Neto, partner, Pinheiro Neto
law firm
HenioDeNicola,recyclingcoordinator,Brazil-
ian Aluminum Association (Abal)
Breno Palma, director of corporate affairs,
Estre Ambiental
Mario Reali, mayor, Diadema (São Paulo
state)
Wladimir Ribeiro, partner, Manesco, Ramires,
Perez, Azevedo Marques law firm
Flavio Miranda Ribeiro, technical advisor to
the office of the Secretary for Environment,
São Paulo state
Roberto Laureano Rocha, member, National
Movement of Recyclable Material Collec-
tors (MNCR)
AndrÉ Luis Saraiva, head of social and envi-
ronmental responsibility, Brazilian Associa-
tionoftheElectricalandElectronicIndustry
(Abinee)
Odair Luiz Segantini, coordinator, Depart-
ment of Special Waste, Brazilian Associa-
tion of Special Waste and Public Sanitation
(Abrelpe)
Jorge Soto, director of sustainability,
Braskem